Are You Looking for Financial Options for Your Parents?

If you are in the process of reviewing options to help your parents financially then there are a few important questions for you to ponder.

Three Important Questions

  1. Do I have the financial resources to help my parents with their medical and living expenses?
  2. Is there a concern from other siblings as to inheriting the home or the equity?
  3. What are my parents' wishes as to staying home if medical care is needed for an extended time?

Common Reverse Mortgage Concerns

Will the bank take their home?

No, the bank will not take their home. Throughout the life of the reverse mortgage, your parents will continue to own their home and retain title.

How do my parents repay the loan?

There are three viable options for your parents. They can sell their home to repay the lender and collect the proceeds, choose to reimburse the lender directly from a personal account, or refinance the loan.

What happens to the equity if my parents or I decide to repay the loan by selling the house?

There are two options. Either your parents or the heirs can keep the home and pay the balance due on the reverse mortgage, or they can decide to sell the home and use the proceeds to pay off the reverse mortgage. Either way, the remaining equity is retained by the owners or heirs.

What happens to my mom and dad's house if they move into a senior care facility?

A reverse mortgage becomes due and payable when the last borrower moves out of his or her home permanently. For instance, moving into a senior care facility, selling the home, passing away or moving in with the children.

What happens if the loan balance becomes greater than the value of the home?

The Home Equity Conversion Mortgage (HECM) is a non-recourse loan, which means that the borrower can never owe more than what the house is worth. As HECM borrowers, your parents pay a mortgage insurance premium to the U.S. Department of Housing and Urban Development (HUD). They, in turn, guarantee that the borrower will never owe more than the value of their home when the loan becomes due and payable.

Are there restrictions on how my parents spend their money?

Your parents can spend their money any way they want.

Is there any information that provides what all of the fees will be?

The lender is required to provide your parents with the Total Annual Loan Cost, or "TALC" disclosure, which is required by the Federal Reserve Board. The TALC displays the total transaction costs over the projected life of the loan, which will allow your parents to see all costs related to the reverse mortgage.